There has been a major concern recently focusing on student loan debt and its potential negative impact on the economy. Seeing this as a potential serious problem, President Barack Obama, on June 9, 2014, took executive action and expanded the Pay As You Earn (PAYE) program for federal student loans.
In the current program, borrowers who had federal student loans had to pay 10% of their “discretionary” income toward their loans every month. In addition, all remaining debt a borrower had been generally forgiven after 20 years of payments. However, the current program is specifically limited to those former students who had taken our their first loans “after” October, 2007 and who borrowed as recently as October, 2011.
President Obama’s expansion of the PAYE program will now be extended relief for borrowers who took out federal student loans “before” October, 2007 and those who stopped borrowing by October, 2011. The new PAYE program will be effective in December of 2015.
Many former and current students may have specific questions about the PAYE program, and the following from the program’s administration’s fact sheet answers some of these often asked questions.
1. What loans are eligible for the PAYE program?
Any undergraduate and graduate loans that are federal student loans made under the federal “District Loan Program” are eligible. It is important to know that the “Parent PLUS Loans” and private student loans will not be eligible.
2. How will students’ monthly payment amounts be determined with the PAYE program?
According to the program, there are a few factors that will determine your monthly payment. These include what your income is, which is based on your AGI, or adjusted gross income, your family size, and your state of residence. Remember that if you are married and file a joint federal tax return, your AGI will include both you and your spouse’s income.
3. Will the monthly payment remain the same for the duration of the loan?
You will have to provide documentation on your income each year and document your family size and your monthly payment is then readjusted on a yearly basis.
The Department of Education has a plethora of information on the PAYE program. Simply visit its website, which includes how you can determine what your monthly payments and lifetime costs will be by filling out the specific data.
Even though attending college is expensive, it is definitely a huge benefit in the long run. If you are thinking about going to college and have any questions about the application process or anything else dealing with getting into college, please contact us as we offer a variety of programs that will best prepare you for being accepted.